Sprint Stock Should Outperform Verizon and AT&T

Wireless provider Sprint Corp (S) remains one of the most compelling turnaround stories in the market currently. The telecom giant is in the second year of its 5-year turnaround plan and it is beginning to see results. There are several positive catalysts surrounding Sprint that should drive shares higher in the

There are several positive catalysts surrounding Sprint that should drive shares higher in the near-term.

Sprint has its lowest churn rate in its 21-year mobile history, one of the most important metrics for a telecom company.

While competitors Verizon Communications Inc. (VZ) and AT&T Inc. (T) set their sights on capturing high value clients, the lower cost carriers Sprint and T-Mobile US Inc (TMUS) have focused on stealing away customers from their bigger competitors.

It’s working.

Sprint has already received 4-5 times more orders for Apple Inc's (AAPL) new iPhone 7 than past models.

Two Key Catalysts For Sprint

Unlimited data: This is becoming increasingly important to mobile users, especially to the data hungry millennial consumer.

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Data has become the primary use of smartphones and cellular service is just not as important as it used to be.

Cost effective: The lower cost carriers are catching up. In the past, users of premium providers such as Verizon and AT&T looked down upon the lower cost carriers. As smartphones have become essential to our everyday lives, consumers are fed up with getting gouged with data overages. Unlimited data is becoming the norm and carriers like Sprint are in the lead.

Performance to date

Sprint is the top performing telecom stock thus far in 2016.

Sprint: +87% YTD

T-Mobile: +17% YTD

Verizon: +8% YTD

AT&T: +14% YTD

Marcelo Claure Is A Top Notch Telecom Executive

Sprint’s CEO Marcelo Claure is a key bright spot for the company. He has gone toe-to-toe with outspoken T-Mobile CEO John Legere, upping the battle to take the #3 carrier spot.

Claure started the now private Brightstar Corp, which distributes mobile phones and serves 200 carriers in over 100 countries. Brightstar was acquired by Japan’s Softbank Corp. for 1.26 billion. Softbank is Sprint’s current biggest shareholder with nearly a 85% stake in the company. Through Claure’s leadership and telecom industry prowess, Sprint has cemented themselves as a viable player in the industry moving forward.

Through Claure’s leadership and telecom industry prowess, Sprint has cemented themselves as a viable player in the industry moving forward.

Another key catalyst for Sprint's rise has been their effective marketing campaign with former Verizon spokesperson Paul Marcarelli. The campaign has been one of the most successful in company history, with over one billion impressions on social media. It also led to Sprint's biggest ever one-day gain in July, up 28%.

There has been much speculation surrounding a potential T-Mobile/Sprint merger, which has been rumored to happen for years. Sprint made a play to acquire T-Mobile in 2014, but was met with skepticism from the FCC. The mergers approval could hinge on the upcoming elections, with Recon Analytics Roger Entner saying, “the merger certainly could (happen) under a Republican president."

Expect Sprint to move higher

Whether a merger does happen, there are many reasons to be bullish on Sprint as its sentiment is starting to turn around and the stock price is reflecting it.

The company has solid management in place and the company is committed to growth. All of Sprint's employees have an incentive package tied to the wireless carrier's turnaround, meaning no equity will be offered until the stock price hits the $8 mark.

I have every reason to believe Sprint will hit the $8 price target, and the next earnings report should reflect the positive results Sprint has been garnering through its turnaround plan.

"Yes, Sprint is not better than Verizon yet, but we are the comeback story," said CEO Marcelo Claure.